Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 124,200 units at a price of $72 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses $8,942,400 3,168,000 $5,774,400 Selling expenses $1,584,000 Administrative expenses 960,000 Total expenses 2,544,000 Income from operations $3,230,400 The division of costs between variable and fixed is as follows: Varlable Fixed Cost of goods sold Selling expenses Administrative expenses Management is considering a plant expansion program for the following year that will permit an increase of $792,000 in yearly sales. The expansion will increase fixed costs by $105,600, but will not affect the relationship between sales and variable costs. Required: 60% 40% 50% 70% 50% 30% 1. Determine the total varlable costs and the total fixed costs for the current year Total variable costs Total flxed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year Unit variable cost Unit contribution margin 3. Compute the break-even sales (units) for the current year. 2,980,800 2,731,200 48 56,900 units 4. Compute the break-even sales (units) under the proposed program for the following year units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the3,230,400 of inco e from operations that was earned in the current year units 6. Determine the maximum income from operations possible with the expanded plant. 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Income 8. Based on the data given, would you recommend accepting the proposal? a. In favor of the proposal because of the reduction in break-even point. b. In favor of the proposal because of the possibility of increasing income from operations. .In favor of the proposal because of the increase in break-even point. d. Reject the proposal because if future sales remain at the current level, the income from operations will increase. e. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales. Choose the correct